US Airways Shows 115% Gain

PHOENIX ( TheStreet) -- Once again, US Airways ( LCC) is golden.

US Airways stock is up about 115% this year, leading the industry. Since the carrier reported earnings last week, its stock has climbed about 15%. Of note: In the second quarter, US Airways had the highest operating margin in the industry, at 11.7%.
US Airways

Additionally, US Airways has become an on-time machine, leading network carriers in on-time arrivals in 2008 and finishing within a tenth of a percent of first-place United ( UAUA) in 2009. US Airways has continued its strong performance so far this year.

After failing in efforts to merge with Delta ( DAL), United and possibly others, US Airways management has evidently decided that the best course is to run the best possible airline -- and to then see what happens. An airline with high margins and stellar operations has a way of drawing attention, even if CEO Doug Parker reminds us constantly that it has no need to merge with anybody.

On Monday, US Airways, flushed with success, decided to move on attacking what is perceived as its biggest problem: a contentious seniority dispute between its pilots that continues to linger following the 2005 merger with America West. Still steadfastly neutral, the carrier asked the U.S. District Court in Phoenix to protect it from continued legal delays, no matter what the outcome of its contract talks is.

The carrier is now generally well-regarded on Wall Street. Analysts surveyed by Thomson Reuters expect earnings of $1.09 a share in the current quarter, compared with a loss of 83 cents a year earlier.

In a report following the second quarter earnings call, Dahlman Rose analyst Helane Becker wrote that "Unlike other airlines, US Airways is seeing continued positive revenue trends, with July passenger unit revenue estimated to be up 16%. August and September are estimated to be up in the 15% range and the 3Q10 estimate is slightly better than 15%."

Obviously, US Airways executives have noticed the sharp rise in the share price. On Tuesday, four of them -- CFO Derek Kerr, SVP C.A. Howlett, EVP Elise Eberwein and EVP Robert Isom, sold off about 185,000 shares at prices between $10 and $11.

It is not the first time in recent years that US Airways has been an industry darling. In November 2006, shares reached a high of $63.27. Some predicted it would go to $100. Instead, it fell by 90% before starting to recover.

It does not require any particular brilliance to realize that not only is the airline industry intensely cyclical, but so are the fortunes of the companies within the industry.

This brings us to the subject of American ( AMR), the only carrier to report a loss in the quarter. American is out of favor today. Its shares are down 11% this year, and some see the outlook as hopeless for an airline that is retreating from its position as the country's largest carrier to third place.

American's relatively high labor costs, its ongoing negotiations and its lack of merger involvement -- Wall Street loves mergers -- help to explain its current plight.

At the same time, it is widely recognized that American is standing on the beaches of the Atlantic and the Pacific, staring out at anti-trust immunity agreements likely to bring it more than half a billion dollars in new revenue by the end of 2012.

For investors, it may be worthwhile to wonder whether American shares will, at some point, replicate US Airways' climb.

-- Written by Ted Reed in Charlotte, N.C.

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